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Investor in commodities--mainly silver and zinc.
  • Leverage to Silver Price--US Silver's got it going! The Junior that's really a Senior Producer. 3 comments
    Nov 27, 2010 1:44 AM | about stocks: USSIF
    Of all the publicly traded predominately silver based producers, US Silver appears to provide the most leverage to the price of silver. It has the following positive aspects-- A top 10 list many juniors should envy.

    1. US based producer.
    2. Highest cost producer--some may view this as a negative. It can be viewed as a positive if a silver bull. It provides the most leverage to the price of silver. Its cost to produce an oz. is currently around $13. Most companies are in the sub $10 cost per oz environment.  While this provides greater downside protection, it also generates a lower leverage ratio as silver price move up. Many analysts base their price projections on the 200 day mwa silver price. It is currently in the 19-20 range. If the price of silver stays at the same level, the 200 day mwa will be moving up rapidly to the 25+ 200 day mwa. At 27 silver, US Silver's projected cash flows double from the current level at 200 day mwa. If it maintains its projected price to cash flow level, its price should double. Other companies on a comparitive basis will have their projected cash flows go up less than 50% (for the negative cash cost producers) to the 70-80% range for the $10 producers. 
    3. Rising production profile--it has completed necessary mine modifications to allow for greater hoisting capacity and higher production.
    4. It isn't operating at near capacity for its milling possibility. Milling possibility with average grade of its main outlined resource (a silver/copper mix) is in excess of 5 million oz--more than double its projected 2010 output.
    5. It should be able to raise its production per ton by mining more of its silver/copper ore vs. its silver/lead ore. Most of their outlined resource is silver/copper mix with roughly a 20 oz. per ton silver content. Their silver/lead ore represents the minority of its resources and has 10 oz. per ton roughly. By mining more of the richer ore, they can produce more silver per ton--thus dramatically lowering their cost per oz.  As they shift to a higher mix of the silver/copper ore vs. silver/lead, they should be able to hit their target of 15+ oz. per ton production.
    6. They are in a sweet spot for synergies with other mining companies. Silver heavyweights Hecla and Coeur are in the region. They both have cash ready for acquisitions. Both are looking to raise their growth profiles.
    7. It is one of the National Inflation Association's top stock picks.
    8. A long and successful history of mining from its primary mine.
    9. With its considerable strengthened drilling campaign, it should be able to substantially increase its reserve basis. The amount of drilling they are able to do and at the price they can do it is amazing compared to drilling campaigns of other companies.
    10. Infrastructure is in place for multiple mines. Its mines are interconnected via underground tunnels--a unique characteristic. 
    11. Huge land position of highly prospective land.
    12. Recent financial backing by an industry heavyweight.
    13. Recented hired a leading invesor relation firm to increase its visability.

    Wait--that's more than a top 10, it's a baker's dozen. But wait, there is even more. Future blogs will be forthcoming.

    Selling at roughly 10 times projected cash flow at the 200 day mwa price of silver. US Silver has the potential to be a $3-5 stock before 2011 ends. Just my opinion and I'm sticking to it.

    Disclosure: Long US Silver
    Themes: usa.v Stocks: USSIF
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Comments (3)
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  • Chancer
    , contributor
    Comments (3591) | Send Message
    USSIF has been a laggard compared to other silver miners.


    Reasons are:


    Hedged silver prices, combined with being high cost producer.


    Low production performance.


    Many think the problem is bad management and USSIF needs a new CEO.


    Maybe, you should revise your forecast of $3-$5 by end of 2011.


    The real question is: How long will it take USSIF to reach $1?
    13 Dec 2010, 12:34 PM Reply Like
    , contributor
    Comments (13) | Send Message
    Author’s reply » Valid points. Hopefully this issues are in the past.


    Hedge is prudent since on only 1/6 production and makes sure they make a profit in 2011.


    I'm predicting $1 after 4th quarter results are released. Even if they can't production over this year, with these silver prices (if continue), fair value should be 1-3.


    Time will tell.
    19 Dec 2010, 08:14 AM Reply Like
  • DrBill
    , contributor
    Comments (10) | Send Message
    USSIF is still the cheapest silver producer. About 2.5 million oz./yr. produced with another mine (the Coeur) coming on stream in late 2012 adding another one-half million ounces of production. And, selling at less than 5X forward earnings (at $30/oz. silver). USSIF is simply the best value in the silver sector.That does not even count the 14,000 plus acres of under-explored land USSIF has in the Silver Valley.
    10 Jan 2012, 08:19 AM Reply Like
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